‘Bank can’t freeze account without intimating customer’

Banks cannot invoke powers to create general lien to freeze a savings bank account and recover outstanding dues from an account holder without prior intimation to the customer, the Maharashtra state consumer commission held last week.

Invoking the provision for creating lien or freezing a savings bank account has to be with prior intimation to the complainant as opportunity of natural justice, the commission noted, reversing the Mumbai suburban district consumer forum’s ruling.

The district forum had rejected Chandivali resident Arti Krishnan’s complaint against HDFC Bank, stating that the bank was empowered to create lien on her savings bank account and was empowered to debit money from the account for settling purported credit card dues.

On April 25, 2006, Krishnan, who had lost her credit card, was issued a new card. There was a dispute about outstanding dues on the previous card and the bank agreed to settle it at Rs29,000, which Krishnan was supposed to pay in instalments.

Accordingly, she paid first instalment of Rs4,000. But even after adjustment of this amount, the bank showed an outstanding sum of Rs50,802. Later, the bank froze her savings account and withdrew a sum of Rs80,488.

HDFC Bank contested the complaint, contending it had the power to create lien in view of proviso to section 171 of the Indian Contracts Act, 1872, and there were terms in the credit card agreement empowering the bank to act without notice.

The bank, however, did not place the copy of the credit card agreement before the state commission.

“In the absence of documentary evidence on record, relying on the provisions will be of no use,” the commission said, and concluded that action such as creating lien, freezing an account and withdrawing money has to be taken with prior intimation to the customer.

It held the bank guilty of deficiency in service after finding that no notice had been issued to the Chandivali resident, and directed the bank to refund a sum of Rs78,640, with annual interest at 9% within two months.